Digital Finance Analytics (DFA) Blog – Page 29 – Digital Finance Analytics (DFA) Blog

AI Feeding Frenzy Creates A Headache But The Stock Market Is Not The Economy!

Sparked by Nvidia’s latest blowout earnings report, stock surge and general excitement about a “tipping point” in generative artificial intelligence, Thursday was the best day in more than a year for Wall St’s main stock indexes. And the S&P 500 and Dow Jones Industrial Average eked out another closing record high on Friday, with all three Wall Street benchmarks scoring weekly gains, with the S&P 500 up 1.7%, the Dow up 1.3% and the Nasdaq 1.4% higher, as AI stocks had enough steam to keep the rally chugging along.

Nvidia advanced again on Friday, rising a further 0.4%, and briefly traded above $2 trillion in market valuation for the first time and by the ways Nvidia’s gains on Thursday, the session after its blowout earnings, the chipmaker added $277 billion in stock market value, which is Wall Street’s largest ever daily gain. Despite a smaller advance on the final trading day of the week, its performance still dominated the market’s attention.

Yet the performance of Nvidia and other Big Tech has pushed Fed worries into the background even though investors have been walking back expectations for Federal Reserve interest rate cuts.

Recent Federal Reserve speakers echoed the content of the FOMC minutes since those were published. Communication has been understandably cautious on the inflation outlook considering the recent higher-than-expected CPI, particularly stressing the risks of cutting too early or too fast. The 29 February PCE release may well come in stronger than expected, and push rate cut expectations further away.

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Digital Finance Analytics (DFA) Blog

AI Feeding Frenzy Creates A Headache But The Stock Market Is Not The Economy!

00:00 / 00:24:01

A Question Of Democracy!

This week the Senate held hearings into the proposed changes to the way the RBA works. The original review was led by three Technocrats included a recommendation to remove the overrule power. This power specifically, section 11 of the Reserve Bank Act 1959 enables the federal treasurer to “overrule” an action taken by the Reserve Bank in extreme situations, via a clear and determined process, and even though no Australian government had used it in the more than 60 years it is important. It’s supposed to be a democratic fail-safe.

The Technocrats recommended the overrule power should be removed from the act. Their reasoning was that there was a risk that the federal treasurer, and by extension the federal government, might abuse that power. But what if the RBA abuses their power? The proposed change was not supported by the bulk of those who appeared in the Senate hearings, so today we look at the evidence provided.

At the heart of the issue is this. How accountable should the RBA be? And if there is no democratic override from the section 11 power, what happens if the Economists at the RBA set monetary policy in a way that badly impacts ordinary people, bearing in mind that another recommendation was to strike safeguarding the “welfare of all Australians” from their objectives. The focus will be on inflation and employment, only.

Central bankers are not infallible, sometimes makes mistakes, and frankly are already not accountable for their decisions, right or wrong. It’s a question of democracy.

So standing back, it seems it was the Technocrats and Economists who wanted to remove the section 11 power, but those with real lived experience, from both the Central Bank, and Government, as well as many respected observers, all agree.

Democracy would be sacrificed, and the Central Bank would be even less accountable if the power was removed. In other words, it is a question of democracy. And more broadly the idea of unelected Central Banks, being able to impose monetary policy decisions without question should terrify us all.

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Digital Finance Analytics (DFA) Blog

A Question Of Democracy!

00:00 / 00:28:53

Winners And Losers: AI Versus PMI

It was a confusing day on the markets on Thursday as AI related Stocks drove higher on Nvida results, while weak purchasing managers index (PMI) readings from Australia and Japan, together with FED signals for higher rates for longer saw Asian traders favour the dollar, as business activity in both countries slowed through February.

NVIDIA Corporation rose as much as 10% in U.S. aftermarket trade after clocking stronger-than-expected fourth quarter earnings, while its revenue guidance for the current quarter was also above street estimates.

Gains in tech also saw the Nikkei reach an intraday record high, crossing levels last seen in 1989 before the unwinding of a massive speculative bubble through the 1990’s and 2000’s.

However, elsewhere most Asian currencies retreated on Thursday, while the dollar stemmed recent losses as a slew of signals from the Federal Reserve showed that the central bank was likely to keep interest rates high in the near-term.

The Australian dollar was flat as preliminary PMI data for February showed sustained weakness in business activity. The Judo Bank Flash Australia Composite PMI® Output Index* posted 51.8 in February, up from 49.0 in January. The latest reading signalled that private sector activity returned to growth for the first time in five months and at the fastest rate since April 2023. However, while Australia’s private sector activity improved midway into the first quarter, growth was driven solely by the service sector where service providers reported increased enquires from a widening of customer bases, supporting an expansion in output and employment.

However, in contrast, manufacturing new orders fell again, sending production down at the fastest rate since the worst of the COVID-19 pandemic in 2020. Manufacturers continued to see high interest rates and soft conditions dampening demand.

And combined with recent stronger-than-expected wage price index data, driven by a raft of negotiated settlements across both the private and public sectors, which were released on Wednesday, drove traders to pricing in a greater chance that the Reserve Bank of Australia will keep interest rates higher for longer.

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Digital Finance Analytics (DFA) Blog

Winners And Losers: AI Versus PMI

00:00 / 00:11:21

Property: The Dark Truth Politicians Don’t Want To Hear!

The RBA minutes just out included a discussion about the case to raise the cash rate further. It centred on the observation that it would take some time for inflation to return to target and the labour market to full employment. Inflation was expected to take a further two years or so to return towards the midpoint of the target range under the central forecast. In the end, they held the cash rate target unchanged at 4.35 per cent, and the interest rate on Exchange Settlement balances unchanged at 4.25 per cent. But this is an important signal.

Yet the 13 RBA driven rate hikes have had a perverse impact on property. Since January last year, Australian property prices have been rising in many parts of the country, recouping almost all the losses incurred after the Reserve Bank of Australia began raising interest rates in 2022. They might be slowing a bit, now, but that was not meant to happen.

In fact, there is strong demand for property, buoyed both by increased population and a resurgence in demand from cashed-up older generations. Yet supply is not keeping up, and mortgage lending is tighter now for many as the costs of a mortgage rise. The signals are clear – we have a major crisis in housing. Renters are caught in the cross-fire, but purchasers are also in the firing line too.

Housing rapidly is becoming a lightning rod for a generation staring down the prospect of having next to no hope of buying a residence under their own steam. We may see ourselves as an egalitarian society with a universal education and health system that provides opportunities for anyone willing to have a go. Housing is broken, and politicians won’t tackle the real issues.
Could it be that the fact they are much more likely to own investment property stop them from acting, or is it the fact that this would require real action, not political spin?

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Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog

Property: The Dark Truth Politicians Don’t Want To Hear!

00:00 / 00:13:22

DFA Replay Q&A: A Mortgage Broker’s View Of The Property Market: With Chris Bates

This is a recorded version of my latest live show in which I discussed the current state of play of the property and mortgage markets with Chris Bates. Chris started as a Financial Adviser back in 2007 and sold his Financial Advice business in 2020. Over the past 9 years, Chris has grown into one of Australia’s top Mortgage Brokers and is passionate about taking the product providing industry to a trusted advice based profession.

Previously Weathful, Chris, and the team decided, in 2023, to rebrand and are now ‘Blusk’ – a name that better encapsulates the feeling they achieve for their clients. And further changes are afoot, as you will see on the show.

He is known for regularly airing his views on sound property investing on both LinkedIn and popular property industry podcasts The Elephant in the Room and Australian Property Podcast.

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Find out more beforehand by watching this show: Many Households Are In Trouble – Mate! https://youtu.be/np4H9RkPqEo

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Digital Finance Analytics (DFA) Blog

DFA Replay Q&A: A Mortgage Broker’s View Of The Property Market: With Chris Bates

00:00 / 01:20:52

Tip Of The Asbestos Iceberg: The Nightmare Continues Across NSW

More sites have now been confirmed to have asbestos including transport infrastructure projects, primary and secondary schools, supermarkets and hospitals, according to the EPA, across NSW. The premier, Chris Minns, has said the Environment Protection Authority (EPA) is examining the sites as it undertakes its largest investigation ever.

The agency on Saturday said a public school, park, and two part-built housing estates were tainted, while transport projects, a warehouse and a hospital have also been confirmed as impacted.

The activity underway to tackle exposed sites is a pimple compared with the total load in the community. But of course, agencies do not want to take the lid off that can, so individuals must become asbestos aware, that is the cornerstone of our ongoing campaign over at Asbestos Awareness Australia.

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Digital Finance Analytics (DFA) Blog

Tip Of The Asbestos Iceberg: The Nightmare Continues Across NSW

00:00 / 00:08:51

The Rental Market Is Broken…

In my latest surveys we showed that cash flow stress among households has risen to an all time high of 73.47% or more than 2.27 million households.

Mapping the Market data from CoreLogic shows the high proportion of areas where house rents have risen by 20% or more across Sydney, and Melbourne, those here, some areas especially to the east of the city did not follow suite. House rents in Brisbane showed more diversity, though central Brisbane saw consider considerable hikes. Adelaide and Perth also had many hot spot areas across house rentals, with some areas to the east of both CBD’s reporting slower growth rates over the past year.

That said, Canberra and Hobart bucked the trend with little or no growth – of course there are rents controls in the ACT which helps to moderate rents.

All this means that for many renters the ability to house themselves has become even more expensive, and this of course flows through into the inflation data with all rents – not just new rents running close to 10% annualised. It’s a real mess, and leading to real social consequences.

Then again, there are some winners as according to data from SQM Research residential landlords in some inner-city and middle ring suburbs pocketed up to $56,000 extra rental income in the past 12 months as rents hit record highs across the major capital cities.

A critical factor here is that some landlords, sitting on strong capital gains, are looking to crystalize their paper profits so have listed their rental property for sale, a trend we see most strongly in Melbourne, but it is spreading elsewhere. In addition, higher rents are not enough to cover the increased mortgage costs, even after negative gearing, so the supply of rental property is on the decline at a time when migration continues to run hot.

The Rental Market Is Broken but do those in political circles want to tackle this critical issue? Lip-service apart, I suspect not. So to that extent, Australia in broken too.

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Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog

The Rental Market Is Broken...

00:00 / 00:09:07

Another White-Knuckle Ride On The Markets!

This is our weekly market update covering the US, Europe, Asia and Australia plus gold, oil and bitcoin.

This was another volatile week on the markets, as traders played the volatility card and as U.S. stocks fell on Friday with the Nasdaq showing the largest decline after a hotter-than-expected producer prices report eroded hopes for imminent interest rate cuts by the Federal Reserve. Higher for longer.

Earlier this week, a hot consumer prices report sparked a selloff in equity markets as Tuesday’s latest US Consumer Price Index inflation report for January showed both headline and core prices in both monthly and annual terms climbed faster than economists’ forecasts. The former rose 3.1% year-over-year last month, hotter than the +2.9% expected. That makes it harder for the Fed to cut rates. Then later a slump in January retail sales on Thursday stoked hopes of rate cuts.

Fridays producer price index for final demand rose 0.3% last month after declining by a revised 0.1% in December, the Labor Department’s Bureau of Labor Statistics said.

Higher for longer was reinforced by Atlanta Fed President Raphael Bostic who said he needed more evidence inflation pressures are easing, but is open to lowering rates at some point in the next few months and San Francisco Fed President Mary Daly said “there is more work to do” to ensure stable prices, despite remarkable progress.

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Another White-Knuckle Ride On The Markets!

00:00 / 00:23:08

The RBA Is Trapped: With Tarric Brooker…

Journalist Tarric Brooker joins me for a Friday review, and this week we look at the RBA and how it is trapped thanks to conflicting data.

He also walks through some important slides on property and China. Here is the link to the slides: https://avidcom.substack.com/p/dfa-chart-pack-16th-february-2024

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Digital Finance Analytics (DFA) Blog

The RBA Is Trapped: With Tarric Brooker...

00:00 / 01:07:27